HousingWire recently spoke with Desmond Smith, chief growth officer at United Wholesale Mortgage, about the role that wholesale lending plays in the mortgage ecosystem and common myths and misconceptions about becoming an independent mortgage broker.
HousingWire: What role has wholesale lending historically played in the mortgage ecosystem?
Desmond Smith: There are two ways to get a mortgage — wholesale or retail. Retail lending is when you walk into a bank branch or go to an online lender, and they help you get a mortgage. In the wholesale channel, you work with a local independent mortgage broker in the community. These folks are entrepreneurs who work as independent mortgage advisors and help match borrowers to the best lender for their financial situation.
Mortgage brokers emerged as key players in the industry in the 1980s because they offered access to multiple lenders and loan products. Up until the financial crisis in 2008, mortgage brokers held nearly 50% market share. Now, they are sitting at 22% and climbing, because they offer the most loan options to borrowers.
HW: How has wholesale changed over the past 2–3 years?
DS: The growth of the channel has been significant, especially in terms of technology. UWM is focused and committed to building custom technology specifically for independent mortgage brokers. As the top mortgage lender, we are always building, growing and improving broker tools on a daily basis.
The strength of the channel has also improved over the past several years. Mortgage brokers are uniting like never before and finding a true community as entrepreneurs and independent business owners with common goals.
We’ve always known it was cheaper to go through a broker and last year HMDA data proved it. Consumers who use a mortgage broker instead of a retail lender save $9,400 over the life of the loan and that increases to $10,400 for minorities. Consumers get a lower rate, lower fees and an exceptional client experience when they work with an independent mortgage broker. As more consumers realize they can have cost savings and elite client service, the more they are going to seek out a local broker in their area.
HW: How is broker market share trending?
DS: Market share is increasing at a rapid pace, currently at 22%. More people are realizing that not only is the wholesale channel the best place for a consumer to get a loan, but it’s also the best place for a loan officer to work and the best lending partner for a real estate agent.
In 2020 and 2021 when refinances were booming, we saw every lender thriving. But now that rates have increased and we’ve shifted to a purchase-focused market, brokers continue to thrive while retail is struggling.
For this reason, we’ve seen a lot of retail LOs make the transition over to the wholesale channel by joining a mortgage brokerage. In fact, in 2022, over 20,000 loan officers joined the wholesale channel. Cheaper rates coupled with a more efficient process, custom-built technology and customizable marketing — we’re going to continue to see thousands follow suit.
HW: What are some of the common myths or considerations that retail originators must contend with when they consider becoming an independent mortgage broker?
DS: One of the biggest myths that an originator contends with when deciding to become an independent mortgage broker is that by going independent they won’t have the support they’d otherwise have by working at a retail lender.
Fact is, they have even more support because they are not beholden to one lender’s options, but multiple lenders who are committed to helping support and grow their business. From marketing and product offerings to training and technology, there are many resources that originators can take advantage of as independent mortgage brokers.
And those tools are just the start. We have a team that focuses solely on wholesale development to help originators transition into the wholesale channel. The Be A Mortgage Broker team will support LOs through the entire process to ensure they know what to expect every step of the way.
Once brokers are in the wholesale channel, UWM will continue to exclusively support them. For example, we offer things such as expert training through Success Track to help coach new and experienced loan originators, Brand 360 to help market to new clients and retain old ones and Blink+, a free online mortgage application for borrowers, Plus, LOS and CRM capabilities. These tools come at no cost to the originator, which is a huge cost savings to the broker as well.
In addition to support from the lenders in the wholesale channel, there are many other means of support that they can find in trade organizations like AIME whose mission is to protect, support and grow the community of independent mortgage brokers. Brokers can leverage these networks to help guide them through becoming a mortgage broker to support them throughout their career.
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